Here's Why KT Skylife (KRX:053210) Can Manage Its Debt Responsibly

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that KT Skylife Co., Ltd. (KRX:053210) does use debt in its business. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is KT Skylife's Net Debt?

You can click the graphic below for the historical numbers, but it shows that KT Skylife had ₩166.7b of debt in June 2025, down from ₩256.1b, one year before. But on the other hand it also has ₩182.2b in cash, leading to a ₩15.4b net cash position.

A Look At KT Skylife's Liabilities

Zooming in on the latest balance sheet data, we can see that KT Skylife had liabilities of ₩198.7b due within 12 months and liabilities of ₩212.7b due beyond that. Offsetting this, it had ₩182.2b in cash and ₩152.8b in receivables that were due within 12 months. So it has liabilities totalling ₩76.6b more than its cash and near-term receivables, combined.

This deficit isn't so bad because KT Skylife is worth ₩256.3b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. Despite its noteworthy liabilities, KT Skylife boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for KT Skylife

Although KT Skylife made a loss at the EBIT level, last year, it was also good to see that it generated ₩13b in EBIT over the last twelve months. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if KT Skylife can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. KT Skylife may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, KT Skylife actually produced more free cash flow than EBIT over the last year. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

Although KT Skylife's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of ₩15.4b. The cherry on top was that in converted 347% of that EBIT to free cash flow, bringing in ₩44b. So is KT Skylife's debt a risk? It doesn't seem so to us. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. To that end, you should be aware of the 1 warning sign we've spotted with KT Skylife .

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.